Two Trial Court Rulings on Arbitrator Non-disclosures and Evident Partiality


On March 3, 2017, Circuit Court Judge Jeannette Castagnetti issued findings of fact and conclusions of law in two cases vacating arbitration decisions due to insufficient disclosures by arbitrators. In AOAO The Palm Villas at Mauna Lani Resorts v. CONSTRX LTD et. al. (“Palm Villas”), the Court concluded that prior and undisclosed relationships between the arbitrator and a party’s counsel and law firm demonstrates a reasonable impression of partiality warranting vacatur of the arbitrator’s award.


In Palm Villas, the Court concluded that the arbitrator’s failure to disclose that she had been appointed to serve as an arbitrator in a matter by one of the party’s attorney’s law firm eight days before being appointed to serve as arbitrator in the Palm Villas matter created an impression of possible bias. The Court discussed how the party’s law firm was a “frequent flyer”, “repeat player” or “steady customer” of the arbitrator and was not with the other party’s law firm and insufficient disclosure of the nature of past dealings supported the conclusion of evident partiality. Evidence of any actual bias was not necessary.


The Palm Villas case in now being appealed.


Also on March 3, 2017, Judge Castagnetti issued findings of fact and conclusions of law in the Nordic PCL Construction, Inc.  v. LPIHGC, LLC (“Nordic”) case. In the Nordic case, the Court concluded that the arbitrator’s failure to disclose that one of the law firms involved in the arbitration case had also represented the arbitrator in his capacity as Trustee of a large local trust was a fact that a reasonable person would view as likely to affect the arbitrator’s impartiality and required vacatur of the arbitrator’s award. The fact that one of the managers of Nordic knew that the arbitrator was a trustee of the trust and one of the partners in the law firm that represented Nordic had a brother in law that worked for the local trust was not sufficient to constitute notice to Nordic of the arbitrator’s potential conflicting relationship with the trust and its attorneys.


The Nordic case also presented the ”repeat player”, “steady customer” dynamic. In the Nordic arbitration, three law firms were involved as attorneys for arbitration parties. During the pendency of the arbitration, attorneys from two of the law firms engaged the arbitrator to serve as mediator in three unrelated matters. The Court concluded that the arbitrator’s failure to disclose the three concurrent engagements to provide services as mediator created a reasonable impression of partiality warranting vacatur of the arbitrator’s award. Apparently, it was not consequential that during the pendency of the arbitration, the third law firm had also attempted to but did not succeed in engaging the arbitrator to serve as a mediator in an unrelated matter.


The Nordic case appears headed back to arbitration.



Highlights from March 29, 2017 Forum on Arbitration Vacatur Rulings: ramifications and recommendations


The HSBA ADR and Litigation Sections, ACR Hawaii and the Center for Alternative Dispute Resolution sponsored a forum session to discuss the ramifications and recommendations following the Hawaii Supreme Court’s rulings in the Nordic and Madamba cases concerning the vacatur of arbitration decisions where there is insufficient arbitrator disclosures of potential conflicts of interest. In the Madamba case, the Court ruled that the “failure to meet disclosure requirements under HRS § 658A-12(a) or (b) is equivalent to, or constitutes, ‘evident partiality’ as a matter of law” and that “a potential conflict of interest creates evident partiality warranting vacature even when no actual bias is present.”

Advocates, arbitrators, retired judges and mediators engaged in a thoughtful and robust discussion sharing concerns and ideas for keeping the arbitration process a useful, fair, productive efficient and economical one. It was noted that the Court’s rulings have served to make arbitrators far more deliberate and careful to make more complete disclosures of existing or past relationships, dealings and interactions that may potential be found to be suggestive of potential partiality. To that extent the case rulings have resulted in a healthy improvement of the arbitration process.


However, the rulings and the lack of clarity as to what kinds of “relationships” or “dealings” are sufficient to amount to “evident partiality” have also caused many damaging and troubling ramifications to the practice of arbitration. Such ramifications include the following:


  • Parties unhappy with the results of an arbitration decision are incentivized to engage in post-decision Google searches and private investigations to find an arbitrator’s undisclosed “relationship” or “dealing” in order to gain a judicial order of vacatur.
  • Many large arbitration cases will warrant a post-decision challenge to gain a chance for a second bite at the apple.
  • Increased appeals, delay, lack of finality and cost due to repeat arbitration processes.
  • Increased exposures to higher awards of prevailing party attorneys’ fees and costs.
  • Game playing and sand-bagging.
  • Intentional or unintentional creation of post-appointment conflicts.
  • Malpractice exposure for failure to adequately investigate arbitrator, failure to disclose prior dealing or relationship that leads to vacatur of a favorable arbitration award and failure to warn or advise client properly.
  • Exposure to claims for the disgorgement of fees.



Recommendations for what parties, advocates and arbitrators can do to mitigate some of these concerns were discussed. They included:


  • Creating a party drafted protocol or adopting an agency rule such as DPR Arbitration Rule 9D which creates a contractual agreement to make parties, their advocates and the arbitrator share and participate in the process of fully and  fairly identifying any pending, prior or future relationship, dealing or interaction between or involving the parties, their attorneys, arbitrators and witnesses that might give rise to concerns of possible arbitrator partiality in the matter. After an agreed time and opportunity to identify and disclose witnesses and to investigate and consider such information, the parties can agree to accept the disclosures and waive the right to challenge and seek vacatur of an arbitrator’s decision because of any item of disclosure that was disclosed or which reasonably could have been identified during the period of disclosure and investigation. Such protocols can also include the commitment that parties will not identify engage substitute counsel or additional co-counsel so as to create a potentially disqualifying conflict. Arbitrators can also conduct a pre-hearing disclosure process, possibly on the record,  to accomplish the same objectives for assuring a full and fair disclosure process.
  • Parties and their attorneys should implement procedures to protect and prevent their engagement of the arbitrator in any further contemporaneous case, matter, relationship or dealing during the pendency of the arbitration. Arbitrators should refrain from accepting contemporaneous engagements to perform services on another matter from a party or law firm involved in the pending arbitration matter.
  • A suggestion that parties and their attorneys expressly acknowledge in their arbitration agreements that any dispute arising under the contractual relationship is a matter affecting interstate commerce and expressly adopt the Federal Arbitration Act (and not the Hawaii RUAA) and the Federal Court as the designated judicial forum was met with some skepticism as to whether such an agreement would be enforceable and binding.